Wednesday, April 27, 2011

Soros-backed Gavilon Buying Up U.S. Grain Elevators

Following up on "Farmers Betting on Corn Storage (and how not to sell a silo)" we have some big money doing the storage thing. Backround after the jump.
From Reuters:

Gavilon to buy Union Elevator PNW grain elevators
U.S. grain firm Gavilon Grain said on Thursday it will buy Union Elevator and Warehouse's 16 grain elevators in the Pacific Northwest, the company's second big purchase of U.S. grain facilities in the last six months.

Privately held Union Elevator, where employees own a significant share of the company, approved the transaction on Wednesday, with sale expected to be completed during the second quarter of 2011.

The purchase of 16 elevators at 12 locations in eastern Washington will expand Gavilon's grain capacity by 8.4 million bushels....MORE
Here's the earlier acquisition that made Gavilon the third largest grain handler (behind Cargill and ADM).
From the Kansas City Business Journal:
Kansas City ag giant DeBruce agrees to sell to Gavilon
DeBruce Cos., the Kansas City area’s third-largest private company, will sell to Gavilon LLC. The companies did not disclose the value of the deal.

Omaha-based Gavilon has a definitive agreement to buy Kansas City-based DeBruce. As part of the deal, DeBruce will operate as a subsidiary of Gavilon and be led by present CEO and founder Paul DeBruce. COO Larry Kittoe will continue in that role with DeBruce Grain.

DeBruce reported $4.6 billion in revenue for 2009. It employs 550 people; subsidiaries include DeBruce Feed Ingredients Inc., Creston Bean Processing LLC and DeBruce Transportation.

The companies said the combination will result in one of the nation’s leading commodity-management firms and third-largest grain storage network.

The acquisition nearly doubles Gavilon’s grain storage capacity, adding DeBruce’s 140 million bushels in 23 facilities to Gavilon’s 150 million bushels in 88 facilities....MORE
A few weeks after that October announcement the Financial Times had a pretty good backrounder:
Wall Street bets on commodities trader
George Soros and other Wall Street investors are backing a US commodity merchant that is clawing its way into the ranks of the industry’s top trading houses.

The investors – not usually associated with the mundane work of moving and storing corn, fertiliser and crude oil – are betting a more crowded, richer planet will rely more on international trade to meet localised food and energy needs.

Gavilon, as the merchant is known, is this month expected to complete the purchase of grain handler DeBruce in a deal that will raise its grain storage capacity to 300m bushels, surpassing the US operations of Bunge, a New York-listed rival, and third only to Archer Daniels Midland and Cargill.

The expansion comes amid forecasts of a tightening balance of supply and demand. The US Department of Agriculture on Tuesday said global wheat and corn stocks were forecast to “drop significantly” everywhere but China, “wiping out nearly all the stocks build-up of the past several years”. World oil consumption is again on the upswing after two years of decline.

“It’s just a huge opportunity,” Greg Heckman, chief executive, told the Financial Times in a rare interview. “If you look at the thesis among our investors, what they saw in Gavilon was a commodity management platform that is positioned to help the global producers and consumers solve these challenges.”

Ospraie, a New York commodity fund manager; General Atlantic, a private-equity firm; and Soros Fund Management acquired the former trading unit of ConAgra Foods for $2.8bn. They completed the deal in June 2008 as commodity indices were breaking records and renamed the company Gavilon, derived from the Spanish for hawk....MORE
Finally here's Gavilon's hometown paper, the Omaha World-Herald, just before the De Bruce deal:

Growing too fast to remain a secret
As you head toward No. 11 ConAgra Drive, there's no clue that you're approaching the headquarters of a company with more than 300 high-salaried local employees, owned by some of the nation's biggest investment groups, with a global network that markets and shuttles billions of dollars worth of grain, fertilizer and fuel each year.

Nor can many people in Omaha tell you much about Gavilon Group.

But Gavilon has become a widely known name in the behind-the-scenes world of commodities, from grain elevators in the Farm Belt to shipping and trading of grain, fertilizer, natural gas and petroleum products on six continents. And some day, Gavilon might even appear on Wall Street. (Ticker symbol GVN is available.)
For now, Gavilon's 1,100 worldwide employees are concentrating their specialized skills on keeping those three basic commodities — grain, fertilizer, petroleum products — flowing smoothly around the globe.
“We're excited about the opportunities,” said Greg Heckman, Gavilon's president and CEO since ConAgra Foods sold it for $2.8 billion in 2008. “The world is going to demand more food and fuel, and we're going to be there to help that happen as efficiently as possible.”

Even if you haven't heard of Gavilon, you probably have products that the company has touched.
Eggs in the refrigerator? Gavilon traders carry out the sales between grain farmers and poultry producers.
A loaf of bread? Not only the grain but also the fertilizer used to boost yields likely passed through Gavilon's computerized systems as well as its grain storage network, which has a capacity of 150 million bushels.
Natural gas furnace? Gavilon trades energy commodities, ensuring natural gas is available when winter sets in.
Gavilon’s name is new, adapted from the Spanish gavilan, for “hawk.” (One of Gavilon’s owners is Ospraie Special Opportunities Fund, which conjures the fish-eating bird called osprey.)

The other owners are General Atlantic, a $15 billion investment fund based in Greenwich, Conn.; Soros Fund Management, which is affiliated with investor George Soros; and a Gavilon management group.
Despite having a new name, the company traces its roots to 1874, when Peavey Co. of Minneapolis built its first grain elevator.

ConAgra bought Peavey in 1982 and in 1998 moved Peavey's trading group — 100 people and a $5 million annual payroll — from Minneapolis to Omaha. ConAgra merged its and Peavey's traders on a specially built trading floor in the fifth and newest building on the ConAgra campus.

But changes in direction focused ConAgra's attention on brand-name packaged foods, and the ConAgra Trade Group, as it was known, became a “non-core” business. Still a viable business, its future was uncertain within ConAgra.

Heckman worked for ConAgra for 24 years, joining the company after graduating from the University of Illinois, and he helped shepherd the transition to the new owners.

The purchase by the investment group resolved the uncertainty, Heckman said, creating a company whose core business is exactly what its staff is equipped to carry out....MORE
I'm guessing I might be referring back to this post.